Business loans and lines of credit have become more difficult to obtain these days, so I had to learn how to help a lot of businesses get creative. Businesses of all types, sizes and histories need credit to grow or close a gap in their payment process. From the small business owner to the publicly listed or reported business, everyone who has crossed my path of late is in the uncharted waters of change, and the same financial institutions that have supported them over the years are turning down loans. Where to go now?
Among the many alternative financial solutions that I have been recommending is the merchant account loan. Think of it as a “bridge” loan at credit card rates: It’s expensive, but it’s a great way to close a short-term gap or pay for an income-enhancing expansion. It’s basically an advance against future credit card earnings based on your business account history for the past few months. Apply for the loan simply by showing your merchant account statements and completing a simple application. Your credit card history will determine how much the bank is willing to lend you; it’s that easy.
No collateral is required, and there are no personal guarantees. You don’t need to have impeccable credit, just no open bankruptcies. You must have been in business for at least two to three months and be processing a minimum of a few thousand dollars a month in credit card sales. There is no application fee. And best of all, funds typically arrive in your business bank account in a matter of days, up to $200,000 or more per location.
This loan is not intended to be long-term, unless your projections show that your increased cash flow from business expansion is significant enough to cover the higher interest rates. It’s convenient: you can borrow again and again if it makes sense, as in the case of phased expansion. So you can use the cash to buy inventory or equipment, remodel or expand, open a new location, or re-advertise, as long as it makes sense, and usually without restrictions.
To get a loan against your merchant account, you may need to change your merchant account provider to one that offers such a loan; just make sure that if you switch, your merchant account fees won’t increase, and ask if they cover other expenses, such as applicable cancellation fees for your old account and equipment.